Confidence is rising among North Sea oil and gas firms but many are still finding trading difficult, a survey has suggested.

It found 38% of contractors were more optimistic about their activities on the UK Continental Shelf in the current year.

This compared with just 10% who were less optimistic.

The figures were well up on "historic lows" six months ago when only 12% were more confident and 47% less confident.

However, 52% reported no change in their outlook.

Aberdeen and Grampian Chamber of Commerce (AGCC), which commissioned the survey, said that indicated there were still "significant challenges" in the marketplace.

On a positive note, 52% of contractors and operators thought the sector had already reached the bottom of the downturn.

A further 26% predicted it would do so within the next year.

'Positive direction'

The survey also suggested that investment was "moving in a positive direction". More contractors (26%) said they expected to increase investment than reduce it (19%) while 36% forecast no change over the next two years.

Operators and licensees, on balance, also forecast a rise.

However, AGCC said the increases were "limited to certain areas and again cannot be seen consistently across all parts of the industry".

While more firms reported working at or above optimum levels, operators and licensees reported a 2.5% decline in their workforce in the 12 months to March 2017. Contractors reported a 6% decline.

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On sector-specific activity, the majority (81%) of contractors said they expected to be involved in decommissioning in the next three to five years.

Just over half of respondents (54%) reported a similar interest in renewables.

Just under 70% of firms said they expected to be involved in unconventional oil and gas activity in the UK in the medium term, with 65% expecting to be involved outside the UK.

James Bream, research and policy director at AGCC, said: "We're seeing some signs of recovery for the industry and the global outlook is certainly more positive than it was six months ago but it is clear that most companies are still suffering.

"We are hopefully stepping into a more prosperous period in due course but that is not upon us for now.

"It seems clear that many believe that we won't return to previous levels of activity and that perhaps we shouldn't call this a downturn. This isn't a 'new norm', it is just normal."

The 26th AGCC oil and gas survey of 100 firms was conducted by the Fraser of Allander Institute in April.